SEC Climate Disclosure Rules: Four potential paths under President Trump
The US Securities and Exchange Commission (SEC) adopted landmark final rules (Climate Disclosure Rules, or Rules) in March 2024 intended to enhance and standardize climate-related disclosures for publicly listed companies. The Rules required all domestic and foreign publicly traded companies to disclose climate-related risks and mandated certain filers report material greenhouse gas emissions.
Although the Climate Disclosure Rules were set to take effect on May 28, 2024, they were voluntarily stayed by the SEC on April 4, 2024, after nine cases challenging their validity were filed in federal courts across the country. Those cases were subsequently consolidated in the Eighth Circuit Court of Appeals and remain pending.
The Climate Disclosure Rules now face a bigger threat: the Trump Administration. This alert examines the potential pathways by which the Administration may address the Climate Disclosure Rules, based on the first Trump Administration’s approach to agency rules, campaign statements regarding similar agency initiatives, and post-election actions.
A review of the 2016 Trump Administration’s approach to agency action
During his first term, President Donald Trump made a concerted effort to limit agency action. In 2017, he signed an executive order commonly known as the “one in, two out” rule. This order mandated that for every new “significant regulatory action” an agency implemented, two existing regulations had to be eliminated. By 2018, President Trump asserted he had repealed more regulations than any other president. Many of these rollbacks were focused on environmental rules; indeed, the first Trump Administration rescinded more than 100 environmental rules, often justifying these rollbacks by arguing that prior administrations had overstepped their permissible legal authority.
The Trump Administration’s approach led to similar actions by the legislative branch. Under the 115th Congress (2017-2018), 16 regulations were repealed utilizing the Congressional Review Act (CRA) – an act that allows Congress to overturn rules promulgated by federal agencies – a sharp increase from its prior usage. In fact, before President Trump’s first term and the 115th Congress, the CRA had been used only once (by the 107th Congress (2001-2002)) since its enactment in 1996.
In the intervening four years, President Joseph Biden took an expansive view of agency authority, including issuing more than 200 “economically significant rules” (ie, rules expected to have a large impact on the economy). There are therefore a significant number of new regulatory targets for the Trump Administration – including the Climate Disclosure Rules – if it maintains the first Administration’s policy of aggressive regulatory rollbacks, as expected.[1]
President Trump’s 2024 statements and steps before taking office
President Trump’s statements and actions during his 2024 campaign suggest he will persist in curbing executive agency powers during his second term. He has vowed to revive and intensify his earlier “one in, two out” policy by implementing a “one in, ten out” rule, and he formed the Department of Government Efficiency (DOGE). Moreover, in a speech at the Economic Club of New York, President Trump pledged to “launch a historic campaign to liberate our economy from crippling regulation.” His campaign press secretary reinforced this stance, claiming that “President Trump’s pro-growth, deregulatory agenda ignited the greatest economy in history.”
President Trump’s cabinet nominations reflect this stated approach. For example, President Trump nominated Paul Atkins for SEC Chair. During the notice-and-comment period for the then-proposed Climate Disclosure Rules, Mr. Atkins, along with four others, submitted a comment letter asserting that the Rules posed “irreparable damage to the SEC’s regulatory and enforcement program.” Atkins also argued that companies should disclose only financially material climate-related risks and called the proposed Rules an overreach of the SEC’s statutory authority. Atkins later reiterated his position in an article he co-authored in the Wall Street Journal, stating that “[t]he SEC would be wise to retract and rethink its planned disclosure rule now” because it violated the law and was “outside the expertise” of the SEC. Lee Zeldin, newly confirmed Environmental Protection Agency Administrator, holds similar views and has criticized environmental regulations, stating that “left wing” policies have caused “businesses to go in the wrong direction.”
Given these facts, it is unlikely that the Trump Administration will support the Climate Disclosure Rules.
The Trump Administration’s potential paths forward
The following section explores four potential strategies the Trump Administration may evaluate to alter, rescind, or nullify the SEC’s Climate Disclosure Rules.
Option 1: Rescission under the Administrative Procedure Act
The Trump Administration may attempt to rescind and replace the Climate Disclosure Rules through the Administrative Procedure Act (APA). Section 553 of the APA requires agencies to conduct a notice-and-comment process, during which an agency seeking to effectuate a rule must first publish a Notice of Proposed Rulemaking (NPRM) in the Federal Register and provide an opportunity for the public to comment on the proposed rule. Once this period closes, the agency must consider the public’s feedback and address substantive comments before finalizing the rule. This process applies equally to rulemaking, rescission, or amendment.
Since the Climate Disclosure Rules have already undergone the notice-and-comment rulemaking process, the SEC would need to repeat this process to rescind or amend them.[2] The public comment period typically lasts 30 to 60 days. However, an exception exists if the SEC demonstrates “good cause” to bypass the notice-and-comment requirements. In such cases, rescinded or amended rules can take effect immediately upon publication.
The Trump Administration could therefore direct the SEC to revise or repeal the Climate Disclosure Rules, potentially reducing or eliminating climate-related disclosure obligations. This process would be relatively straightforward, although likely somewhat drawn out. Another downside – at least from President Trump’s perspective – is that APA-based rescissions lack permanence. In other words, a future administration could reintroduce similar regulations. This “ping-pong” effect occurred with the definition of “waters of the United States” under the Clean Water Act, which was repeatedly revised between 2015 and 2023.
Alternatively, the Trump Administration could indefinitely delay the Rules’ effective date, effectively neutralizing them without formally amending or rescinding them. But this approach would be the least permanent option since any future administration could reinstitute the Climate Disclosure Rules immediately.
Option 2: Leverage pending litigation
The Trump Administration could also allow the pending litigation against the Climate Disclosure Rules to proceed, potentially securing a judicial invalidation. The Eighth Circuit Court of Appeals, which is hearing the case, has a conservative-leaning bench, increasing the likelihood of an unfavorable ruling for the SEC. Ten of the eleven presiding judges were appointed by Republican administrations, and all sitting senior judges were Republican-appointed as well.
A potential appeal to the Supreme Court is also unlikely to result in the Climate Disclosure Rules being upheld. In last year’s Loper Bright Enterprises v. Raimondo decision, the Supreme Court overruled Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., which had required federal courts to defer to agency interpretations of ambiguous laws (typically referred to as “Chevron deference”). As a result, under Loper Bright, federal courts must independently assess whether a challenged agency action was within its statutory authority.
Thus, Loper Bright intensifies the Climate Disclosure Rules’ legal jeopardy. During the rulemaking process, the SEC claimed that the Rules were an acceptable exercise of their statutory authority under Section 13(a) of the Exchange Act. But that assertion has been repeatedly challenged by commentators, as well as litigants in the Eighth Circuit. Without the deference previously afforded under Chevron, the Supreme Court may be more willing to strike down the Climate Disclosure Rules.
As an aside, even if the SEC does not wish to continue to defend the Rules, ending the litigation will be a process in itself, as the lawsuits against the SEC will need to be dropped by, or settled with, the numerous plaintiffs that brought suit against the SEC. And not all of those litigants opposed the Climate Disclosure Rules – some wanted the Rules to go even further, making them unlikely to drop a lawsuit when the alternative is their nullification.
Alternatively, the SEC might choose to stay enforcement and delay the litigation indefinitely. Former SEC Commissioner Robert Jackson Jr. stated as much when he speculated that the SEC might tell the courts it will “reconsider” the rules – meaning, it will “sit on [the rules] for years.” This approach would leave the Climate Disclosure Rules in limbo, but it would avoid a precedent that permanently limits the SEC’s authority. Recent decisions, such as SEC v. Jarkesy, which prohibited the SEC from using in-house tribunals in place of jury trials when pursuing cases with civil remedies, may make this approach more attractive. The Jarkesy case highlights the risks of litigation, and the Trump Administration might prefer a more targeted approach and avoid further erosion of agency powers that could have unintended consequences.
Option 3: Withhold SEC funding
The third option, albeit an indirect one, is for the Trump Administration to work with the Republican majority in Congress to condition the SEC’s funding on non-enforcement of the Climate Disclosure Rules. Congress controls agency funding and could prevent enforcement of the Climate Disclosure Rules through appropriations restrictions. For example, in a different context, Congress prohibited the Occupational Safety and Health Administration (OSHA) from using appropriated funds to regulate small farms that do “not maintain a temporary labor camp and employs ten or fewer employees.” A similar rider could block SEC funding for Climate Disclosure Rules enforcement, or any similar provisions or regulations. Such riders would not be a new phenomenon since previous appropriations bills have included a rider prohibiting the SEC from requiring companies to disclose political spending. In fact, Congressional Republicans have already tried to do this. In June 2024, the House Appropriations Committee proposed a spending bill that would have prohibited the SEC from using agency funding to enact, implement, or enforce the Climate Disclosure Rules. Now that Republicans control both chambers of Congress, enacting a preventative rider on SEC funding is more feasible.
The Trump Administration could also try to sidestep Congress and do this itself by “impounding” funds – which is the concept that presidents have the exclusive power to control federal spending even after Congress has appropriated funds to federal agencies. While the 1974 Impoundment Control Act restricts this authority, President Trump has expressed interest in challenging these limitations. If successful, this approach could allow his Administration to block SEC enforcement without congressional approval.
Option 4: Repeal through the Congressional Review Act
Lastly, the Trump Administration may consider working with Congressional Republicans to repeal the Climate Disclosure Rules using the Congressional Review Act (CRA). Given how frequently the CRA was used during the first Trump Administration – successfully repealing 16 federal agency rules with the 115th Congress alone – it would, at first blush, be an attractive option, particularly because an agency rule nullified by the CRA is not only repealed but the agency is also barred from implementing another rule that is “substantially the same.” Congressional use of the CRA is also not subject to judicial review.
The CRA, however, is no longer a viable option. It provides that Congress has 60 days after an agency submits a rule to pass a joint resolution of disapproval, which must then be signed by the president. House Republicans began this process in April 2024 after the Climate Disclosure Rules went into effect, but their resolution stalled before reaching a full House vote. The CRA’s 60-day deadline subsequently passed over the summer, meaning it is no longer an option for the incoming Trump Administration. Thus, although CRA nullification would have been a preferred approach for blocking the Climate Disclosure Rules and preventing the SEC from proposing comparable regulations in the future, the incoming administration will need to pursue other strategies.
Next steps
In sum, the Trump Administration has several avenues to undermine and effectively annul the SEC’s Climate Disclosure Rules. While repealing the Rules through the CRA would have likely been the incoming administration’s preferred approach, APA amendment, congressional funding restrictions, and/or litigation-based options remain viable strategies. Each approach presents unique opportunities and challenges, with varying levels of permanence and impact.
Although the Climate Disclosure Rules will not go into effect under the Trump Administration, market participants should stay up to date on their status, and companies should remain diligent about their climate-related disclosures, particularly those that conduct business in California or the European Union to ensure compliance with the climate disclosure rules in those jurisdictions. This includes evaluating current climate-related risks, public-facing disclosures, and budgeting to ensure there are sufficient investments and resources available to comply with all applicable requirements. And any companies that volunteer climate-related disclosures must continue to ensure the accuracy of all representations in their public filings. Moreover, all market participants should consider hiring experienced regulatory counsel to help them navigate what is certain to be a shifting legal landscape as climate and ESG-related rules and guidelines continue to evolve.
For more information on the Climate Disclosure Rules, please contact any of the authors of this article or your DLA Piper relationship attorney.
[1] It is worth noting that this back-and-forth implementation and rescission of regulations, colloquially referred to as “ping-ponging,” is not new in American politics. For example, the Obama Administration largely rescinded the Bush Administration’s “Conscience Rules,” only for President Trump to reinstate them during his first term. A similar pattern occurred with the Keystone Pipeline. President Obama denied a permit for the pipeline, which President Trump subsequently approved. Later, on President Biden’s first day in office, he revoked this approval.
[2] An example is the 2017 repeal of the Clean Power Plan (CPP). Two months into President Trump’s first term, he directed the EPA to review the CPP. Later that year, the EPA replaced the CPP with the Affordable Clean Energy (ACE) rule. When the ACE rule was vacated in 2021, the CPP was not reinstated.
